Nigeria’s Oil Sector Shake-Up: Government Moves to Transfer Contract Control from NNPC to Regulator

Nigeria’s oil industry, the backbone of Africa’s largest economy, is once again at the center of major policy debate. This time, the focus is on a proposed amendment to the Petroleum Industry Act (PIA) 2021, which could strip the Nigerian National Petroleum Company Limited (NNPC) of its authority over oil contracts and hand that power to the Nigeria Upstream Petroleum Regulatory Commission (NUPRC).

The development, revealed through a letter from the Attorney General of the Federation, Lateef Fagbemi, has sparked heated discussions across the energy sector, political circles, and among economic stakeholders. While government officials argue that the change is necessary to curb “statutory leakages and opaque deductions,” critics warn that it could create fresh governance challenges and conflicts of interest.

Why the Change?

The PIA, passed in 2021, was celebrated as a long-awaited reform meant to overhaul Nigeria’s oil and gas industry, attract investment, and promote transparency. Under the current framework, the NNPC acts as both the national oil company and concessionaire of oil contracts. This gives the company wide-ranging powers to manage production sharing contracts, joint ventures, and risk service agreements with international oil companies.

However, the Attorney General’s office has flagged significant flaws in this arrangement. According to Fagbemi, leaving contract control in the hands of NNPC — which also operates as a commercial entity — creates avenues for “opaque deductions” and revenue losses to the Federation account. In other words, the government fears that too much power concentrated in the NNPC boardroom has weakened transparency and accountability in oil revenue management.

What the Amendment Proposes

The proposed amendment would transfer the role of concessionaire from NNPC to the NUPRC. In practical terms, this means:

• NUPRC becomes the government’s direct representative in all oil contracts, including production sharing agreements and joint ventures.
• NNPC’s board loses approval powers over key decisions such as annual budgets, cost recoveries, and work programmes.
• Ownership of NNPC shares, currently split between the Ministry of Petroleum Incorporated (MOPI) and the Ministry of Finance Incorporated (MOFI), may shift fully to MOFI, reducing political overlap.

Effectively, the regulator would no longer just oversee industry compliance but would also sit at the heart of contract negotiations, a role traditionally played by national oil companies.

Support for the Move

Proponents of the amendment argue that this is the only way to strengthen oversight of Nigeria’s oil revenues. For years, questions have been raised about how much crude oil is actually produced, exported, and how much revenue makes its way into the Federation account.

With oil still accounting for over 80% of Nigeria’s foreign exchange earnings, plugging leakages is critical to stabilising public finances. By giving NUPRC — a statutory regulator — direct control over contracts, the government hopes to eliminate the blurred lines between NNPC’s commercial interests and its responsibility to remit funds to the treasury.

Supporters also note that a stronger regulator could help Nigeria attract fresh investment in the oil sector, which has been declining in recent years due to regulatory uncertainty, theft, and energy transition pressures.

Concerns and Criticism

Despite its good intentions, the proposal is not without controversy. Many stakeholders fear that assigning contract control to NUPRC would create a conflict of interest. Regulators are supposed to enforce rules and ensure industry compliance, not manage contracts as active participants. If NUPRC plays both roles, critics argue, it risks compromising its independence and credibility.

Others worry about the impact on NNPC’s transformation journey. Since the PIA, NNPC has been restructured into a limited liability company, expected to operate more transparently and competitively. Stripping it of its contract authority could weaken its ability to stand as a global energy player, especially in competition with other national oil companies like Saudi Aramco or Petrobras.

Furthermore, the transition could create bureaucratic bottlenecks. Shifting contract files, renegotiating roles, and redefining institutional responsibilities will take time and may discourage investors already wary of Nigeria’s regulatory environment.

Possible Implications

If the amendment sails through, Nigeria’s oil governance landscape will change dramatically:

1. Revenue Management – More direct oversight of contracts could improve remittances to the Federation account, boosting government revenue at a time of rising debt and budgetary strain.

2. NNPC’s Future – The national oil company may be forced to focus purely on commercial operations such as exploration, refining, and marketing, while losing its strategic policymaking influence.

3. Investor Sentiment – The clarity (or confusion) created by the new framework will determine whether international oil companies expand or reduce their investments in Nigeria.

4. Legal and Political Battles – NNPC and allied interests may resist the changes, leading to protracted debates in the National Assembly before any amendment can be passed.

Looking Ahead

The push to amend the PIA reflects Nigeria’s ongoing struggle to strike the right balance between transparency, efficiency, and profitability in managing its vast oil resources. While the 2021 Act was hailed as a game-changer, the reality of implementation has exposed gaps that the government is now eager to fix.

Whether transferring contract control from NNPC to NUPRC is the silver bullet remains to be seen. What is certain is that the decision will reshape Nigeria’s oil sector power dynamics and test the government’s commitment to reform.

For everyday Nigerians, the key question is simple: Will this change put more oil money into public coffers and, ultimately, improve living standards? That is the standard by which the success of any reform will be judged.